Mutual fund fees have lowered but still count a lot
By Dian Vujovich
Here’s a great quote from John Bogle, the founder of Vanguard, that pretty much says it all with respect to making money when investing in mutual funds: “The shortest route to top quartile performance is to be in the bottom quartile of expenses.”
There was a time when I thought expenses weren’t all that important. But that was when I was thinking like a hedge-fund investor and focusing only on the dreamy potential returns that could be coming my way. In other words, future performance.
But the hope of pie-eyed returns in the world of hedge fund investing always comes with big time fees and expenses no matter what kind of investment return is received.
In the world of mutual funds, the fees are less onerous and have been getting lower over the years. But whether higher, lower or flat, all fees and expenses ding every investor’s return.
Mutual fund fees have come a long way from the front-end load fund fees of 8.75 percent that pretty much were standard back in the 1980’s. Today, owning shares of a mutual fund has become less expensive with many averaging around 1 to 2 percent each year.
“The average expense ratio paid by investors in any mutual fund category is influenced by multiple factors, which can include fund growth coupled with economies of scale, as well as industry competition and investors gravitating towards lower cost funds,” said Sean Collins, ICI’s Senior Director of Industry and Financial Analysis.
InvestorPlace.com pointed out four low-cost funds that have shown high-performance returns over the past few years. They include the T. Rowe Price Growth Stock fund (PRGFX); The Fidelity Blue Chip Growth (FBGRX) fund; The Columbia Acorn International Z fund (ACINX); and Janus’ Triton T fund (JATTX) .
But before rushing into any of them, take some time to use this
easy-to-use source for comparing mutual fund expenses available via
FINRA’s website. Called The Fund Analyzer, here you’ll be able to compare three funds to see how much their fees are and what the impact of those fees would be on your investment. And then three more again and again if you’d like
It’s a cool and informative analyzer. Try it out at:
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